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Goods Received Not Invoiced (GRNI) Reconciliation Process Benefits

Benefits of GRNI-Reconciliation

In the course of doing business, many companies often receive goods they’ve purchased before they receive the corresponding invoice from the supplier. In companies using a perpetual inventory system, such goods are classified as “received” and must be recorded in the company’s inventory system. However, since the supplier has not yet invoiced the buyer for the goods, they can’t be entered into accounts payable. Instead, they’re entered into an account known as Goods Received Not Invoiced, or GRNI.

While it neatly addresses the problem of current liabilities without matching invoices, GRNI must be monitored properly to provide maximum value to your business. Understanding how GRNI works, and how best to manage it, will help your team reap valuable benefits.

GRNI Reconciliation: An Overview

The GRNI account is what’s commonly called an adjustment account or controlling account. It is shown as a current liability on a company’s balance sheet. Its use is limited to businesses using a perpetual inventory system, as those using a periodic inventory system do not enter goods as received until the end of the accounting period and don’t post an entry until the actual invoice is received from the vendor.

Consider this example:

Your company uses a perpetual inventory system, and purchases $1200 worth of widgets from Company X. The widgets arrive before the invoice does. Your accounting team creates a journal entry in the general ledger to reflect the receipt of the goods into inventory like so:

ACCOUNTDEBITCREDIT
Inventory$1200
GRNI$1200
Total$1200$1200

Because you haven’t yet been invoiced, it’s necessary to credit the liability created by the goods to the GRNI account rather than accounts payable and debited to Inventory.

Once you receive the vendor’s invoice, the journal is updated with another entry transferring the liability from the GRNI to the accounts payable account for the supplier in question, like so:

ACCOUNTDEBITCREDIT
GRNI$1200
Accounts Payable$1200
Total$1200$1200

Creating this entry zeroes the GRNI account and records the goods in inventory while effectively tracking the liability required to pay the vendor for the goods in the accounts payable account.

“Using an automated, cloud-based procurement solution powered by artificial intelligence takes a lot of the pain and expense out of proper GRNI management. PurchaseControl, for example, generates an automated GRNI report on demand, eliminating the time, expense, and potential human errors that plague a manual GRNI reconciliation.”

How Proper GRNI Reconciliation Can Benefit Your Business

While useful in preserving the accuracy and integrity of your company’s financial records, the GRNI account can also be a source of potential waste and expense if not properly handled. Because a typical GRNI may contain hundreds or even thousands of items that must be reconciled to multiple vendor accounts, it can quickly become time consuming and costly, especially when human error is factored in.

The substantial amount of work required for manual GRNI reconciliation, coupled with the usual challenges faced by companies managing a complex supply chain—vendor delays, invoice fraud, inefficiencies in the procure-to-pay (p2p) process, etc.—can sometimes allow it to slip through the proverbial cracks. When vendors fail to invoice you promptly, GRNI can grow to staggering proportions, reflecting potentially ruinous roadblocks, errors, and inefficiencies in your p2p process—creating inaccuracies in your accounting and financial reporting while setting off alarm bells for auditors.

Using an automated, cloud-based procurement solution powered by artificial intelligence takes a lot of the pain and expense out of proper GRNI management. PurchaseControl, for example, generates an automated GRNI report on demand, eliminating the time, expense, and potential human errors that plague a manual GRNI reconciliation.

Automation removes the human element, improving accuracy while freeing your staff to dedicate their time and talents to higher value tasks. Time that might’ve been spent double-checking vendor data or correcting mistakes can instead be used for innovation and strategic planning.

And since all transaction data is automatically cross-checked against other matching documents (e.g., each purchase order is matched to both its corresponding receiving paperwork and the vendor invoice for the order), external sources of fraud are reduced and accounting errors such as double entries are eliminated. Automated report generation allows for complete control over data granulation, so your staff can “zoom in” on specific data or perform actions in bulk, such as editing a line item in a particular purchase order, marking suspicious items or orders for additional review, or clearing account balances.

In addition, having rapid, real-time access to GRNI supports stronger supply chain management and relationship development. Vendor information is always up to date, and underperforming or slow-to-invoice vendors can be easily rehabilitated or replaced before their inefficiencies cost your company too much.

On the other side of the coin, vendors who provide both timely invoicing and optimal terms can be promoted to preferred vendor status, allowing your company to get the best terms and pricing for all its items while keeping accurate financial records with an impeccable audit trail. Freeing up assets that would otherwise be held in reserve for unpaid invoices improves your cash flow, too, supporting expansions, acquisitions, and other projects.

Get More Value from Your GRNI Reconciliation Process

While it may not be priority one for the average megacorp, a proper GRNI reconciliation process can be a significant source of value—and a stronger bottom line—for businesses of all sizes. By breaking free from outdated manual processes and tapping into the power of automation, you can transform GRNI from a tedious chore to a powerful source of insight, savings, and improvements in your supply chain, relationships, and internal processes.

Make Accurate, Automated GRNI Reconciliation Part of Your Procurement

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